Maximizing the Information Content of a Balanced Matched Sample in a Study of the Economic Performance

Buildings have a major impact on the environment through excessive use of resources, such as energy and water, and large carbon dioxide emissions. In this paper we revisit the study of Eichholtz et al. (2010) about the economics of environmentally sustainable buildings and estimate the effect of green building practices on market rents. For this, we use new matching methods that take advantage of the clustered structure of the buildings data. We propose a general framework for matching in observational studies and specific matching methods within this framework that simultaneously achieve three goals: (i) maximize the information content of a matched sample (and, in some cases, also minimize the variance of a difference-inmeans effect estimator); (ii) form the matches using a flexible matching structure (such as a one-to-many/many-to-one structure); and (iii) directly attain covariate balance as specified —before matching— by the investigator. To our knowledge, existing matching methods are only able to achieve, at most, two of these goals simultaneously. Also, unlike most matching methods, the proposed methods do not require estimation of the propensity score or other dimensionality reduction techniques, although with the proposed methods these can be used as additional balancing covariates in the context of (iii). Using these matching methods, we find that green buildings have 3.3% higher rental rates per square foot than otherwise similar buildings without green ratings —a moderately larger effect than the one previously found by Eichholtz et al. (2010).